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Analysis

Mexican Trends of the Solar Industry

Wed, 02/19/2014 - 12:00

In the last five years, the PV sector has grown primarily in the Mexican residential market due to its cost-saving potential under the DAC tariff. According to the National Solar Energy Association (ANES), three years ago the solar market size was of around 1MW and until recently, this had remained at approximately 6MW. Nevertheless, the first large-scale solar project, Aura Solar I, started operations in 2013, accounting for 30MW to come online in different phases. One of the main challenges that the Mexican solar market must contend with is that the country has easy access to cheap natural gas from the US and the absence of subsidies and feed-in tariffs. Financing is another important challenge, starting with ensuring that financial institutions are interested in supporting solar projects. Mexico has important solar resources, standing at around twice the solar irradiation received by Germany. However, the Mexican market does not have the feed-in tariffs and subsidies that helped the European solar sector grow, thus it has to grow by itself at a slower but more sustainable pace. Seeking to tap into Mexico’s manufacturing potential, solar panel manufacturers have started operations here but primarily do so in order to export panels to the US market.

The recently created energy bank scheme is an important facilitator of the competitiveness of renewable energy in Mexico, as it provides virtual storage possibilities that reduce the payback period. In Mexico, ANES is working to raise awareness about the benefits of solar energy in the public sector. However, the participation of solar energy in Mexico’s energy mix, as established in SENER’s Renewable Energy Forecasts, is forecasted to be of only 1% to 2% by 2026. There is widespread belief, however, that the potential for solar will prove to be much greater.

Many companies have become interested in the Mexican solar market but regulatory issues, transmission, fossil- fuel subsidies and subsidized tariffs are still proving to be limitations. Even though the Aura Solar I project represents a big advance, the opportunities that exist in the Baja California market are very different from those present in Mexico’s central grid. Solar energy projects still have to increase their ability to compete with tariffs in the central grid and complement the expansion of the electricity sector through natural gas.

Solar technology can vary from solar PV to CSP, ranging from amorphous solar panels, monocrystalline and polycrystalline panels, concentrator panels and flexible panels. But in the Mexican market, price determines the interest of project developers. Yet having access to reliable data on solar energy production would transmit confidence to the international markets and position Mexico more firmly as an emerging solar energy producer. At the moment, each company holds on to their information, and decides individually whether to share the information or keep it as a trade secret. A reliable information system could become a key driver to motivate the government to change policies and banks to finance more projects, benefiting all players.

Mexico is undergoing a cultural change towards sustainable practices and environmentally friendly solutions. Having important solar resources in states such as Baja California, Baja California Sur, Sonora, Chihuahua and Durango, and given its political and macroeconomic stability, Mexico is in a good position to become an attractive solar market. This rings all the more true, considering the expected decrease in costs and the increase of equipment efficiency.